Uruguayan Tax System

As a rule in our country only Uruguayan source incomes will bear taxes. By Uruguayan source incomes we understand the ones that originate from activities carried out, goods located in or rights that are used for economic purposes in the country, regardless of the nationality, domicile or residence of those that took place in the operation or where the legal act took place.

In addition, the incomes obtained for services offered from abroad to IRAE taxpayers (Tax on the Income of Economic Activities) are regarded as Uruguayan source incomes as long as they are related to obtaining incomes included in the IRAE.

Below we detail the main taxes applicable to Public Limited Companies (except in cases where an exemption occurs).

Income Taxes

IRAE (Tax on the Income of Economic Activities)

It is an annual tax that is applied on Uruguayan source incomes that originate from economic activities. The aliquot of this tax is 25% on the net fiscal income.

The trading system exists and counts with important fiscal benefits when the company carries out merchandise trading, without the merchandise going through Uruguay

Personal Income Tax (Residents)

This tax is applied on the yield of the capital, some increases in patrimony determined by law and the work income.

Income to the capital

Interests that correspond to deposits made in national currency and indexed units, for more than a year in local institutions of financing mediation: Aliquot 3%

Interests that correspond to obligations and other debt titles, issued by residence entities for a period of more than three years, through public subscription and the stock exchange value in national entities. Aliquot: 3%

Interests corresponding to the deposit in local institutions, for a period of a year or less, done in national currency without readjustment clause: Aliquot 5%

Dividends or utilities paid or accredited by IRAE taxpayers originated by the returns of movable capital, deposits, loans and in general by every collocation of capital or credit of any nature, as long as the returns come from non resident entities and they constitute passive incomes: Aliquot 12%

Other dividends or utilities paid or accredited by IRAE taxpayers: Aliquot 7%

Returns derived from copyrights of literary, artistic or scientific works: Aliquot 7%

Income of participation certificates issued by financing trusts through public subscription and stock exchange value in national entities, for a period of 3 years: Aliquot 3%

Other incomes: Aliquot 12%

Work Incomes

The tax is applied over the retributions of dependent and independent workers for the amounts that exceed the minimum that cannot be taxed. A progressive rate that ranges from 10% to 30% is applied.

Income tax to non residents

This tax is applied on Uruguayan source income obtained by non-residents. By Uruguayan source incomes we understand the ones that originate from activities carried out, goods located in or rights that are used for economic purposes in the country.

The incomes are taxed with the following aliquots:

a) Interests corresponding to deposits in national currency or indexed units, over a period of more than a year in financing intermediation institutions: Aliquot 3%

b) Interest corresponding to obligations and other debt titles, issued for a longer period than three years, through public subscription and stock exchange value: Aliquot 3%

c) Interests that correspond to the deposits over a period of approximately one year, in national currency without readjustment clause: Aliquot 5%

d) Dividends and utilities paid or accredited by IRAE taxpayers: Aliquot 7%, when these dividends arise from incomes taxed by IRAE.

e) Other incomes: Aliquot 12%

Capital Tax

This tax is applied on capital located in the country of the companies, personal persons, families, and undivided inheritances at the time of the closure of the fiscal exercise or by December 31st of each year, whichever the case.

This tax does not apply on assets located outside the country.

The aliquot in the case of companies is 1.5%. In the case of natural persons (residents or non-residents), families and undivided inheritances there is a progressive rate that ranges from 0.7% to 1%. In this case a non-taxable minimum exists.

Value Added Tax (IVA)

The Value Added Tax is applied on the circulation of goods and services inside national territory, on the introduction of goods to the country and on the added value that arises from the construction done on real estates.

The tax has a 22% rate or a 10% basic rate applicable in certain cases. The added value is the one that results from the difference between the sale and the costs associated with the sale.

This tax does not apply on assets located outside the country.

The aliquot in the case of companies is 1.5%. In the case of natural persons (residents or non-residents), families and undivided inheritances there is a progressive rate that ranges from 0.7% to 1%. In this case a non-taxable minimum exists.

ICOSA (Public Limited Companies Control Tax)

It is a fixed and annual tax applicable to public limited companies in every fiscal exercise. The amount is equal to 4,338.21UI (indexed units) depending on the value on December 31st of the previous calendar year.

The tax has a 22% rate or a 10% basic rate applicable in certain cases. The added value is the one that results from the difference between the sale and the costs associated with the sale.

This tax does not apply on assets located outside the country.

The aliquot in the case of companies is 1.5%. In the case of natural persons (residents or non-residents), families and undivided inheritances there is a progressive rate that ranges from 0.7% to 1%. In this case a non-taxable minimum exists.

Fiscal System applicable to trading

Operating: Operating a trading can be summarized in the following way: a Uruguayan Public Limited Company (hereinafter, “SAU”) in Uruguay (country A) buys goods or offers services in country B. The seller, located in country B invoices the goods or the services to country A.

SAU, located in country A sells said goods or services to a client located in country C.

The goods or the services are delivered or carried out directly destined to country C, without going through Uruguay.

SAU receives the invoice of the supplier of country B and does another invoice with a profit margin to the company in country C.

For the margin, SAU only taxes 25% over 3% of the profit margin. Because of this, the actual rate is 0.75% (25%x3%) on the profit margin.

Applicable Tax System:

Income tax on business activities (I.R.A.E.) In the case of triangulation of goods or provision of services, and provided that these do not go through Uruguayan territory, only 3% of the income of such operations is taxed (Selling price – Purchase price) at a 25% rate.

In case the goods go through Uruguay or the services are carried out in our country this tax will be applicable on a 25% rate over the net fiscal income.

Contributions to Social Security

Management Contributions

Companies must contribute to the social security of their employees. These contributions are calculated over the basis of the net salary of the employees and the rates are as follows:

Retirement contribution 7.5%

Contributions to national health insurance (SNS) 5%

Labor restructuring fund 0.125%

Total 12.625%

When the management contributions and the personal contributions to the SNS (National Health Insurance) do not cover the mutual fee, the employer must pay a complement in order to cover such fee.

SAU, located in country A sells said goods or services to a client located in country C.

The goods or the services are delivered or carried out directly destined to country C, without going through Uruguay.

SAU receives the invoice of the supplier of country B and does another invoice with a profit margin to the company in country C.

For the margin, SAU only taxes 25% over 3% of the profit margin. Because of this, the actual rate is 0.75% (25%x3%) on the profit margin.

Applicable Tax System:

Income tax on business activities (I.R.A.E.) In the case of triangulation of goods or provision of services, and provided that these do not go through Uruguayan territory, only 3% of the income of such operations is taxed (Selling price – Purchase price) at a 25% rate.

In case the goods go through Uruguay or the services are carried out in our country this tax will be applicable on a 25% rate over the net fiscal income.

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